10 Things You Need To Know This Morning

Asian markets closed sharply higher to start the trading week. The Hang Seng was up 4.14%, while the Nikkei and Topix gained 1.9% and 1.5%, respectively. Europe is up marginally for the day, after EU leaders met to outline the EFSF bailout. U.S. markets opened in the green on earnings.

Japanese exports rose 2.4% in September to 5.98 trillion yen ($78.2 billion). Analysts were only looking for a 1% improvement. That follows a five month decline. Yesterday’s Chinese Flash PMI reading came in at 51.1, up from 49.9. Retail sales gained 17.5% during the country’s Golden Week, down from 19.7% last year.

European leaders are halfway through meetings to lay out plans to solve the eurozone debt crisis. The big thing that came out during the weekend talks: ECB involvement in EFSF was ruled out. Current plans require financial institutions to raise capital themselves, before they can tap the €440 billion facility. Reuters estimates banks could need more than €100 billion.

Services and manufacturing contracted in the Eurozone, as the 17-nation region heads towards recession. A survey of purchasing managers declined 1.9 points to 47.2, its lowest reading since July 2009. Economists surveyed by Bloomberg were looking for a drop to 48.8. Any reading below 50 indicates a negative outlook.

Swiss banks are expected to pay billions of dollars and disclose client names as they try to settle an ongoing U.S. tax probe. UBS and Credit Suisse have been engrossed by the probe, which has pitted U.S. and Swiss governments against each other. A settlement reached last year with the U.S. was ultimately rejected by Switzerland as the nation bars disclosure of client data.

Italy is under increasing pressure as investors and politicians view the nation’s $2.2 trillion debt load with increasing scepticism. In a press conference over the weekend, German Chancellor Angela Merkel and French President Nicolas Sarkozy chided Prime Minister Silvio Berlusconi. Check out why everyone is angry with Italy >

The U.S. government will unveil a new mortgage refinance program today, its latest attempt to spur the housing industry and take some bite out of the growing shadow market, the NYT’s Jackie Calmes reports. There is also a rumour circulating that federal officials are considering selling hundreds of thousands of foreclosed properties owned by Fannie Mae and Freddie Mac to investors.

In a recent note, Bank of America’s Ethan Harris predicted that the U.S. credit rating could face another downgrade in November or December. He notes that the rating agencies warned of further downgrades if Congress doesn’t soon finalise a long-run plan to reduce deficits. Check out other countries heading towards default >

Takeover speculation for Yahoo! reached new heights as Google reportedly entered the fray. The company, which would join private equity firms for the deal, joins Microsoft in expressing interest for the firm. Google may have difficulty closing the deal. In 2008, the search giant attempted to partner with Yahoo! but was stopped by antitrust regulators. Private equity firms have recently valued Yahoo! at $16 to $18 a share.

Caterpillar just reported earnings of $1.71, over estimates of $1.57. The company also guided for 2012 sales growth of 20%, well above analyst consensus of 14%. Also in earnings, Netflix and Texas Instruments will report. Analysts are looking for EPS of $0.96 at Netflix, even as the company may post declining subscriber numbers. T.I. is guided for earnings of $0.57. Follow all the releases live here >